MARS (Marielle’s Almost Real Strategy) ESG Fund

This past summer, I interned as an equity research analyst at Gabelli Asset Management Company.  One of the biggest focuses at the company lately is ESG (Environmental Social Governance) investing.  Based on the insight that more Millennials care about the ethics of the companies they invest in, asset managers at Gabelli and elsewhere realized they need to put a stronger focus on this to win over the next generation of investors.  The more I’ve learned about ESG, the more excited I’ve become about it, and I think others will share in my excitement with a little more background.

I think about ESG as a way to incentivize companies to do good by aligning economic and environmental/social objectives.  The best way to motivate companies to act in an environmentally friendly way is for their “green” initiatives to have a positive impact on their balance sheet.  Because of this alignment between business goals and environmental goals, I think ESG investing is the most sustainable way for companies to do good in the long term.

To give a better sense of what constitutes a company that might be found in an ESG fund, I’ll share a few examples of some promising companies I would put in my (theoretical) ESG fund.  One of the easiest industries to make a direct environmental impact on is the food distribution business, so that is where I have focused my fund.

Wasteless

Self-described as “the internet of groceries,” Wasteless works with grocery stores to use dynamic pricing by discounting items that are closest to expiration in order to incentivize customers to buy those products before they expire.  As someone who sifts through every bottle of milk in a store to find the one farthest from expiration, I think this is a genius idea.  This business model has the potential to help grocery stores immensely by saving them from literally tons of lost inventory. Food waste from grocery stores has a tremendous environmental impact, and programs like Wasteless can help reduce that waste of food and packaging.

This model has benefits from the consumer standpoint as well, helping shoppers save money.  If shoppers know they are not going to need their milk to last them two weeks, they might as well buy the cheaper bottle that will only last one week.

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Divert

Divert is another company that acts like a consultant for grocery chains to decrease waste, increase recycling, and increase food donations.  Some of their strategies have included changing packaging materials to those that are cheaper and recyclable, and using tracking methods to evaluate the monetary savings and measure store efficiency.

Another effective strategy they have implemented eliminates the need to sort through recyclable and non-recyclable items, streamlining the composting process to reduce the human labor and effort required.  This is often a burdensome and time-consuming task for grocery store chains, so the savings in labor are very impactful.

Lastly, Divert makes food donation processes easier and more streamlined for clients so that food banks receive as much product from grocery stores as possible without any product from grocery stores being discarded due to miscommunication or slow processes. 
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Spoiler Alert

Spoiler Alert uses data analytics to monitor inventory in order to find ways that will optimize location or portfolio performance.  The company’s platform records financial, environmental, and social information which can be used for internal evaluation, store optimization, and records for tax benefits.  This data can also help stores find the best outlets for unsold inventory instead of letting it end up as trash.

What I think is most unique about this company is that it uses analytics to put a number on the ROI (return on investment) that it creates for companies.  This forces companies to frame these initiatives as a smart investment instead of a just charitable action.  This is especially important for public companies whose primary concern is pleasing shareholders with high earnings.  They may be used to thinking of environmental initiatives only being useful for PR or tax benefits.  But putting a number on the return they’re getting from this investment will make them actually want to commit to these initiatives for the long term.

https://www.youtube.com/watch?time_continue=24&v=TRTVV8BAqXM

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MIWA

MIWA’s (Minimum Waste) tagline is “shopping naked.” But it’s not what it sounds like.  This company advocates buying in bulk and using reusable containers in order to reduce the amount of packaging consumers use.  The system works by having producers sell items to wholesalers in standardized reusable containers.  The wholesalers distribute these to retail locations who sell them to customers.  Customers use the product and return the empty containers to stores who send them to a “control and washing” facility.  This facility then returns the containers to the producer to begin the cycle again.

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This idea may be slightly more far-fetched than the others, but if they were able to establish network effects with a few manufacturers and retail chains, the impact on waste reduction could be staggering.

With more companies working to align economic and ESG incentives, investing in these companies becomes a no-brainer. Afterall, if given the choice between investing in a great company that does nothing for the environment or investing in an equally great company that does something even marginally good for the environment, I would imagine most people would choose the latter. Maybe it’s the optimist in me, or maybe it’s the millennial in me, but this seems like an easy choice. Not just a win-win (business and investor), but a win-win-win (business, investor, and environment).

 

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6 comments

  1. mattwardbc · ·

    This is a really cool idea and definitely something that I believe millennials care about. It’s very cool how these companies are using data analytics to help save food. Food waste is such a big problem and we should be using every option to help curb it.

  2. This was really interesting! Prior to your blog post, I had never heard of Environmental Social Governance investing, but definitely see why this is popular amongst millennials. In a study completed by Forbes last year, it was found that out of 684 investors, 85% of millennials that responded said that they had interest in investing in organizations that have a greater purpose than financial return. I can definitely relate to this, and agree that I would be more inclined to invest in a company that aims to help the world. The website Wasteless sounds really cool, and is something that I would be interested in trying out. I think it would be more successful as an app, rather than as a website, since users most-likely would want to access it on the go while grocery shopping. Nice post!

  3. andrewmanginelli · ·

    Really cool ideas, and I would definitely agree that companies are more likely to implement them if it can help their bottom line. My only question is how hard would it be for a grocer to implement something like Wasteless. If they could seemingly integrate the expiration date into the barcode, they could do a cost reduction based on how close it is to expiring rather easily. However, this may require the bottlers/distributors to be on board with this as well. I’m not sure how willing they would be to revamp their systems in order to make this possible.

  4. chloeshepard18 · ·

    So interesting! This summer I worked for a private equity firm and I did a project that compiled ESG information for all of our companies. Even the investments team at a multi-million dollar company is moving towards this and it has definitely been working. These companies are doing amazing things and should definitely be rewarded for it.

  5. Really nice post. I had never heard of most of these. Nice work!

  6. paulandresonbc · ·

    Very interesting post. I had not heard of any of these companies before, so it was refreshing to hear of some new arrivals in the grocery and food space. I wonder how this will continue to evolve and advance in the future.

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